It’s important to take the time and choose wisely, here’s why.
By Merchant Advocate
Why Choosing the Right POS System Matters
There’s a myriad of decisions to be made when operating a business, but one with long term implications is your choice of point-of-sale system. POS systems can help drive cost savings and reduce credit card fees in the long run if chosen strategically and set up properly. Unfortunately, many companies struggle with managing the nuances of these integrations.
Case Study: Optimizing POS and Fees for Woodstock Inn Brewery
One such business was the Woodstock Inn Brewery. “I didn’t have a lot of confidence in our program—our processor didn’t even assign us a new contact when ours left,” says Roberta Vigneault, financial manager of the award-winning restaurant, brewery, and hotel in New Hampshire. “Roberta reached out to us for a free analysis, and we quickly determined she was a candidate for our services,” says Howard Goldstein, a Merchant Advocate regional director. “We conducted an in-depth analysis, and uncovered Woodstock was being significantly overcharged. Their processor initially came back with a paltry reduction that left a lot of additional savings to be realized,” he recalls.
“Thankfully, their POS system worked with other providers which enabled us to ultimately triple the savings offered by her current processor.”
This is the perfect example of two crucial elements to be aware of when evaluating a POS system: the contract term and early termination fees. Systems often come with lengthy contracts that can make it difficult to make any changes even though your business needs may evolve and change over time. That’s why it’s imperative to take a close look at contract terms and be aware of when you will approach a renewal or end date.
Key Factors in Selecting a POS System
Contract Terms and Exclusivity
Some POS systems lock you into using their preferred payment processor, while others allow you to integrate with multiple payment providers. A system that supports multiple processors provides flexibility and allows for leverage when trying to take control of your transaction fees.
Processors may be open to negotiating lower fees if it means keeping you as a client, but in order to be effective you need to understand the lingo and know what to ask for; a third-party expert like Merchant Advocate can help.
In Woodstock Inn Brewery’s case, non-exclusivity made all the difference “Merchant Advocate negotiated directly with our processor,” recalls Vigneault. “They found a great solution that kept our current POS system but allowed us to work with another processor to maximize savings.”
Integration Capabilities
The payment processor should integrate smoothly with your POS software, allowing for automatic reconciliation of payments, real-time reporting, and synchronization with accounting and inventory management systems. It is crucial to understand what processor options are available with the POS system before you commit to a solution. Some will only allow you to work with one provider, while others are processor agnostic. There are many processor options out there with different fees and pricing structures, so you should be sure to weigh the pros and cons of both the system and the processor. In the case of the Woodstock Inn Brewery, flexibility was key.
Tips for Reducing Credit Card Processing Fees
Compare Processing Fees Across Providers
Business owners should compare fees across different processors to minimize costs, as even small differences can significantly impact profitability, especially in high-volume environments. One should review statements for any additional fees that may be able to be optimized, such as for chargebacks, PCI compliance, and batch processing.
Surcharging Considerations
Surcharging has grown in popularity in recent years, as has legislation regulating its usage. Those considering implementing a program must ensure it is executed correctly on all fronts to avoid potential tax implications—not to mention fines from credit card brands.
Your POS system would need to be able to distinguish credit cards from debit cards and cash payments, then add surcharges accordingly. It is illegal to surcharge a debit card. If you have multiple locations, some of which are in a different state, this further complicates things as you will need to abide by each state’s regulations.
“There are multiple types of programs that allow business owners to pass along processing fees to customers: surcharging, cash discount and dual pricing,” explains Goldstein.
“If you choose to implement a surcharging program, you must make sure your POS system is programmed properly to distinguish between credit and debit cards. The surcharge does not allow you as a merchant to charge debit cards. And these are usually not set up properly.”
Invest in EMV for Security and Savings
If you’ve been contemplating upgrading your old equipment, this is your reminder to do so as soon as possible as EMV is the new standard. Short for Europay, Visa, and Mastercard (the companies that spearheaded the development), this technology refers to the chips embedded in credit cards that carry data far more securely than the vastly outdated magnetic stripes.
By still allowing for magnetic swipes, your business is not only opening itself up to credit card fraud, but you’re likely paying non EMV-assessment fees each month for continuing the antiquated practice. Ensure the POS system you choose accepts EMV chip-enabled cards to reduce liability; some systems may also support PIN entry for added security.
In addition, if you are still swiping cards, you will automatically lose chargeback disputes on swiped transactions. Some people have become savvy to this and know that if they swipe their card they can report the charge as fraudulent with no repercussions.
Newer equipment also means mobile payment support. With the rise of contactless payments, your POS should support digital wallets like Apple Pay, Google Pay, and other tap-and-go payments.
Ideally, the POS hardware should also include offline capabilities that make it possible to process transactions offline or store them securely to process when the system is back online, ensuring smooth operations even during internet outages.
Ensuring PCI Compliance with Your POS System
Payment processors must comply with the Payment Card Industry Data Security Standard (PCI DSS) to protect cardholder information. The system should offer encryption to secure payment data from the moment the card is tapped until it reaches the payment processor. The POS vendor should ensure the system is compliant and assist with security protocols, but that doesn’t always happen, especially with a business that needs to train multiple employees. A consultant could help with personalized assistance in this scenario.
Get Expert Help to Optimize Your POS System and Processing Fees
At Merchant Advocate, we understand every facet of the processing industry, having saved over $300 million in excess fees for our clients by optimizing every aspect of the credit card acceptance process—including helping choose the right POS system for your business.